W&I/R&W insurance

What you need to know

• Standard infrastructure: W&I or R&W insurance is now standard infrastructure in global M&A, accounting for nearly US$5 trillion of aggregate global M&A value, with take-up in a significant proportion of auction processes and corporate buyers now accounting for around half of placements.
• Pricing has turned: After a sustained period of declining rates, premiums rose across most regions in the last twelve to eighteen months, while claims frequency and severity have also increased.
• Local considerations: Convergence in policy architecture across jurisdictions does not necessarily mean convergence in claims outcomes, and differences between markets can determine whether a policy responds at the claims stage.
• A broader product suite: Synthetic warranties, standalone tax insurance, contingent risk cover and specific liability policies are now part of the toolkit.
• Early engagement pays: Deal teams that engage advisers early and treat the policy as a negotiation rather than a box-ticking exercise are better positioned to capture the value of a W&I/R&W insurance policy.
  

W&I insurance (or, known in North America, as R&W insurance) has moved from a specialist risk-transfer mechanism to a core component of global M&A execution. Sellers use it to support clean exits and limit continuing warranty exposure; buyers use it to supplement or replace seller recourse, reduce reliance on escrows or holdbacks, and preserve a direct route to recovery. Its adoption reflects how parties now allocate post-completion risk and seek greater execution certainty.

Corporate and strategic buyers accounted for 54% of placements in 2025, overtaking private equity for the third consecutive year, and buy-side policies account for the overwhelming majority of W&I and R&W insurance placements. W&I and R&W insurance is now mainstream in both competitive and bilateral M&A. Major insurers operate across borders using broadly consistent base forms, so buyers in different jurisdictions will encounter recognisable policy architecture. Claims outcomes, however, remain shaped by local underwriting practice, applicable law, market convention and negotiated policy wording.

Pricing: a turn in the market?

A sustained period of rate decreases ended in 2025 with average North American primary W&I/R&W insurance premiums rising 16% year-on-year, European pricing up 5% and Asian pricing up 8%, while UK and Pacific rates remained broadly flat. At the same time, reduced de minimis thresholds and retentions have been a consistent trend since late 2022, with nil retention now often offered for fundamental warranties.

Mid-market deals with clean risk profiles still attract competitive terms, though certain sectors, such as mining, chemicals, healthcare and technology, face higher rates and wider exclusions. Layered towers are also increasingly common as deal sizes grow and insurers reduce the limits they will deploy on a single risk.

Claims: is the juice worth the squeeze?

Claims activity and recoveries have increased globally, with record payouts and rising notification volumes. Across EMEA, claim notifications have risen 47% year-on-year, and in the UK, W&I/R&W insurance notifications rose by more than 150%.

In Asia, claim notifications have increased by 76% year-on-year. In Australia and New Zealand, approximately one in five policies receive a notification, and 80% of claims arise on deals with an enterprise value below A$500 million.

The distribution of claim drivers varies by jurisdiction. Globally, financial statements breaches accounted for 52% of total payments, although tax breaches were the most frequently notified. This is especially apparent in EMEA and the UK, where many tax notifications are precautionary and do not necessarily result in losses. High-quantum losses tend to be tax-driven or linked to financial statements breaches, particularly on larger transactions.

In North America, financial statements breaches led (26% of claims), followed by compliance with laws (17%) and tax (13%).

In Australia and New Zealand, accounts warranty breaches make up nearly half of claims, and employment and compliance with laws breaches are also disproportionately represented, reflecting a more active enforcement environment. In Asia, financial statements breaches led notifications (41%, against 21% for tax), though severity was concentrated in a small number of large claims (for example, a single US$76 million tax liability claim in Southeast Asia accounted for most of the regional payout in 2025).

In the UK, in 2025, tax breaches were most frequently notified (26%), followed by financial statements (22%) and litigation (19%). Financial statements, nevertheless, generated 58% of UK payments, against 29% for compliance and 13% for material contracts. Most UK payments were resolved within 12 months of notification, supporting the case that W&I/R&W insurance can deliver tangible recoveries when coverage and claims strategy are addressed at placement.

Notification lead times can be long, underscoring the importance of policy duration: more than half of W&I/R&W insurance claims arise more than 12 months post-completion across the UK, North America and APAC. In the UK, for example, 64% of notifications arose 24 to 36 months after inception. By contrast, claims in Asia tend to be notified early, usually within the first year after completion.

Jurisdictional consistency

Against that claims backdrop, certain exclusions and underwriting themes recur across jurisdictions:

• Structural defects exclusions, particularly those relating to design and/or construction, are almost always applied to real estate or property-heavy transactions. Similarly, there is limited market appetite to cover contamination liability (with separate environmental liability policies available for asset-heavy, resources and infrastructure deals).
• Coverage for historic acquisitions and divestments requires diligence on integration and on any ongoing liabilities relating to divested businesses. Pending M&A by the target is generally excluded where it has not completed before signing of the sale agreement.
• Product recall for consumer and food businesses is a standard exclusion, although some insurers are willing to sit excess of product liability insurance, provided adequate insurance diligence has been undertaken. A similar approach applies to professional indemnity and cyber matters, though the latter will usually also require technical or IT due diligence.
• Standard exclusions, such as for consequential or indirect loss and forward-looking statements or opinions, apply across the board. In the US, however, the exclusion for consequential damages is generally deleted from the policy if the transaction document is silent as to indemnity for consequential damages.

While these global trends provide a useful baseline, local underwriting practice determines the focus areas and how those risks translate into coverage. In Australia, for example, employment coverage (particularly underpayment and worker misclassification) is a key focus of underwriting, with insurers typically requiring satisfactory payroll sampling of at least 5% of the workforce before extending coverage.

Adjacent products

The prevalence of these exclusions and sub-limits explains the expansion of the product suite: as W&I/R&W insurance markets mature, cover is increasingly tailored to specific deal risks that standard policies exclude or sub-limit.

Synthetic warranty products, under which insurers assume direct liability in the absence of seller warranties, are being used in distressed sales and administrator-led processes, with underwriting in those scenarios focused on available diligence, the causes of insolvency and challenge risk. They are also increasingly common in Australian public M&A as a means to de-risk transactions where the buyer has no direct contractual relationship with the dispersed shareholder base of a listed entity. Synthetic policies are less common in Asia and the UK.

New-breach cover for risks emerging between signing and completion is available, but at a meaningful cost. It is not frequently taken up, as buyers often seek protection through pricing adjustments, conduct-of-business restrictions and termination rights.

Tax liability insurance, covering contingent or known tax exposures that may be subject to future challenge, surged globally in 2025. In the UK, it is now used beyond its traditional role as a backstop for known tax exposures in acquisitions, supporting reorganisations and non-M&A situations such as wind-ups, restructurings and identified risks under audit or active litigation.

More broadly, contingent liability policies cover known risks arising from disclosed but unquantified exposures, though they attract an additional premium, are usually subject to tight conditions and are generally arranged on a bespoke basis. In the UK, contingent liability insurance is also increasingly used on a standalone basis for exposures such as construction and building safety liabilities, regulatory investigations, IP risks and known litigation, with early engagement critical to structuring. Contingent liability policies are less prevalent across Australia.

Knowledge scrapes are also an available enhancement for an additional premium, allowing certain knowledge and materiality qualifiers, and certain deemed disclosures, to be disregarded when assessing W&I/R&W insurance coverage. This enhancement is more common in the UK and European markets (where it has become a relatively standard sell-side position) than across APAC.

Cyber liability cover is usually offered as excess cover above the target’s existing specialist policies, subject to an appropriate sub-limit.

Taken together, these products reinforce the importance of treating insurance as part of the deal strategy from the outset.

Practical takeaways

Despite jurisdictional differences, several principles are consistent across markets:

• Engage advisers early in the transaction so that the process and diligence can be structured to support sufficient W&I/R&W insurance cover.
• Treat the W&I or R&W insurance policy as a substantive negotiation, not a formality. Otherwise, the policy may contain carve-outs that leave insufficient cover for the specific transaction and its risks. Exclusion breadth, loss definitions and SPA interaction clauses are all negotiable.
• Consider the insurer’s claims track record, not only its price. Pricing may be attractive, but claims-handling experience is a key indicator of whether the insurer will respond effectively when a claim arises.